US:Oil below $US88 ahead of OPEC meeting

Oil prices fell below $US88 a barrel on Friday as traders looked to this weekend’s OPEC meeting for any changes to the cartel’s crude production policy.

Benchmark oil for January delivery lost 58¢ to settle at $US87.79 a barrel on the New York Mercantile Exchange.

Crude has climbed about five per cent in the past 10 days, and on Tuesday it topped $US90 for the first time in over two years.

Oil prices are unlikely to fall significantly if demand picks up. On Friday, the International Energy Agency raised its forecast for global oil demand for this year and 2011.

IEA, based in Paris, thinks consumption in North America and emerging Asian countries, especially China, will be greater than it previously expected. If that happens, IEA said OPEC could boost supplies as prices rise. In 2008, OPEC raised production levels as oil shot past $US100, on its way to a record $US147 a barrel.

The Organization of Petroleum Exporting Countries meets this weekend in Ecuador. “Pre-meeting statements by OPEC ministers suggest the group is planning on a quick agreement to roll over existing output targets," IEA said.

OPEC, which is responsible for 35 per cent of global oil production, has not changed its output quotas since late 2008. Last month, Saudi oil minister Ali Naimi said that oil between $US70 and $US90 per barrel was tolerable for consumers.

Some analysts are concerned that sluggish economic growth in developed countries may not justify high prices for commodities such as oil.

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“The threat of bubbles is greatest in commodity markets," Capital Economics said in a report. “If commodity prices are going to be sustained at these levels, final demand from consumers has to be consistently strong too."

“Since the major developed economies are only gradually recovering from recession, this is placing an awful lot of weight on the rebound in emerging economies."

In other trading on the Nymex, heating oil fell 0.93 of a cent to settle $US2.4575 a gallon, gasoline gave up 3.12¢ to settle at $US2.3093 a gallon and natural gas dropped 1.8¢ to settle at $US4.417 per 1000 cubic feet.

In London, Brent crude fell 51¢ to settle at $US90.48 a barrel on the ICE Futures exchange.